MAP INTERNATIONAL

FINANCIAL STATEMENTS With Independent Auditors’ Report September 30, 2005 and 2004

MAP INTERNATIONAL
Table of Contents

Page Independent Auditors’ Report Financial Statements Statements of Financial Position Statements of Activities Statements of Cash Flows Statement of Functional Expenses–2005 Statement of Functional Expenses–2004 Notes to Financial Statements 1

2-3 4-5 6-7 8 9 10-22

INDEPENDENT AUDITORS’ REPORT

CAPIN CROUSE LLP
Certified Public Accountants

……………………….
Board of Directors MAP International Brunswick, Georgia
Suite 130 1255 Lakes Parkway Lawrenceville, GA 30043 Telephone 678.518.5301 Facsimile 678.518.5302

……………………….
www.capincrouse.com

We have audited the accompanying statements of financial position of MAP International as of September 30, 2005, and 2004 and the related statements of activities, cash flows, and functional expenses for the years then ended. These financial statements are the responsibility of the organization’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the organization’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MAP International as of September 30, 2005, and 2004 and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Atlanta, Georgia November 18, 2005

MAP INTERNATIONAL
Statements of Financial Position

September 30, 2005 Specified Time or Purpose Endowment 2004 Specified Time or Purpose Endowment

Operating ASSETS: Cash and cash equivalents $ Accounts receivable–net Other receivable Pledges receivable–net Inventory: Purchased Donated Prepaid expenses and other assets Investments Property and equipment–net Interfund balances Total Assets $

Total

Operating

Total

589,671 175,032 55,825 314,049 61,090,819 108,990 12,107 1,793,458 (140,863) 63,999,088

$ 2,581,360 998,564 18,707,851 963,524 (156,055) $ 23,095,244

$

3,470,552 296,918

$

3,171,031 175,032 55,825 998,564 314,049 79,798,670 108,990 4,446,183 1,793,458 -

$

450,432 412,091 36,825 238,140 43,968,967 86,329 530,368 1,706,513 (619,895)

$

578,296 1,428,783 7,348,025 881,062 288,740

$

3,436,315 331,155

$ 1,028,728 412,091 36,825 1,428,783 238,140 51,316,992 86,329 4,847,745 1,706,513 $ 61,102,146

$ 3,767,470

$

90,861,802

$ 46,809,770

$ 10,524,906

$ 3,767,470

LIABILITIES AND NET ASSETS: Liabilities: Accounts payable $ Deposits Accrued expenses Notes and loans payable Annuities and trust payable Total liabilities

274,591 250,352 363,393 746,172 1,634,508

$

452,330 452,330

$

-

$

274,591 250,352 363,393 746,172 452,330 2,086,838

$

154,025 27,884 352,444 1,359,421 1,893,774

$

412,640 412,640

$

-

$

154,025 27,884 352,444 1,359,421 412,640 2,306,414

(continued)
See notes to financial statements -2-

MAP INTERNATIONAL
Statements of Financial Position (continued)

September 30, 2005 Specified Time or Purpose Endowment 2004 Specified Time or Purpose Endowment

Operating LIABILITIES AND NET ASSETS, continued: Net assets: Unrestricted Temporarily restricted Permanently restricted Total net assets Total Liabilities and Net Assets $

Total

Operating

Total

62,364,580 62,364,580 63,999,088

479,218 22,163,696 22,642,914 $ 23,095,244

3,767,470 3,767,470 $ 3,767,470 $

62,843,798 22,163,696 3,767,470 88,774,964 90,861,802

44,915,996 44,915,996 $ 46,809,770

459,214 9,653,052 10,112,266 $ 10,524,906

3,767,470 3,767,470 $ 3,767,470

45,375,210 9,653,052 3,767,470 58,795,732 $ 61,102,146

See notes to financial statements -3-

MAP INTERNATIONAL
Statements of Activities

Years Ended September 30, 2005 Temporarily Permanently Restricted Restricted 2004 Temporarily Permanently Restricted Restricted

Unrestricted SUPPORT AND REVENUE: Contributions Donated inventory Donated property and equipment Donated securities and other assets Government grants Handling charges and service fees Investment income Other revenue Total Support and Revenue RECLASSIFICATIONS: Net assets released from restrictions EXPENSES: Program services: Essential medicines Disease, prevention, and eradication Community health services

Total

Unrestricted

Total

$ 4,087,794 230,724,358 27,427 197,998 6,715 3,095,505 (336,919) 33,746 237,836,624

$ 3,190,473 108,247,000 109,133 107,997 111,654,603

$

-

$ 7,278,267 338,971,358 27,427 307,131 6,715 3,095,505 (228,922) 33,746 349,491,227

$ 2,777,237 175,287,722 46,400 191,715 60,658 2,507,068 93,660 45,449 181,009,909

$

922,842 76,561,354 81,831 77,566,027

$

-

$ 3,700,079 251,849,076 46,400 191,715 60,658 2,507,068 175,491 45,449 258,575,936

99,143,959

(99,143,959)

-

-

83,441,661

(83,441,661)

-

-

276,190,561 1,191,365 38,572,526 315,954,452

-

(continued)

276,190,561 1,191,365 38,572,526 315,954,452

196,602,888 1,084,035 39,620,592 237,307,515

-

-

196,602,888 1,084,035 39,620,592 237,307,515

See notes to financial statements -4-

MAP INTERNATIONAL
Statements of Activities (continued)

Years Ended September 30, 2005 Temporarily Permanently Restricted Restricted 2004 Temporarily Permanently Restricted Restricted

Unrestricted EXPENSES, continued: Supporting activities: General and administrative Fund-raising

Total

Unrestricted

Total

1,160,361 2,397,182 3,557,543 319,511,995 17,468,588 45,375,210 $ 62,843,798

12,510,644 9,653,052 $ 22,163,696

3,767,470 $ 3,767,470

1,160,361 2,397,182 3,557,543 319,511,995 29,979,232 58,795,732 $ 88,774,964

681,012 1,694,359 2,375,371 239,682,886 24,768,684 20,606,526 $ 45,375,210

(5,875,634) 15,528,686 $ 9,653,052

3,767,470 $ 3,767,470

681,012 1,694,359 2,375,371 239,682,886 18,893,050 39,902,682 $ 58,795,732

Total Expenses Change in Net Assets Net Assets, Beginning of Year Net Assets, End of Year

See notes to financial statements -5-

MAP INTERNATIONAL
Statements of Cash Flows

Years Ended September 30, 2005 2004 CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Donated inventory Distributed inventory Donated securities, property, equipment, and other assets Depreciation Gain on disposal of property and equipment Net realized and unrealized gains and losses on investments Net realized and unrealized gains and losses in change in value of annuities Investment income restricted for long-term investment Actuarial change in value of annuities Write-off of closely held stock Write-off of uncollectible pledge Changes in operating assets and liabilities: Accounts and other receivables Pledges receivable Purchased inventory Prepaid expenses and other assets Accounts payable and deposits Accrued expenses Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of investments Purchases of investments Proceeds from sale of property and equipment Purchases of property and equipment Net Cash Provided (Used) by Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES: Investment income restricted for long-term investment Proceeds from issuance of annuities Payments on annuities Repayments on notes payable Repayments on capital leases Borrowings on lines of credit Repayments on lines of credit Net Cash Provided (Used) by Financing Activities (continued)

$

29,979,232

$

18,893,050

(338,971,358) 310,489,679 (332,131) 213,829 13,989 (184,246) (25,619) (107,997) 20,098 515,000 500,000 218,059 (69,781) (75,909) (22,661) 343,034 10,949 2,514,167

(251,849,076) 232,717,051 (206,691) 228,243 (2,816) (72,517) (21,143) (81,831) 54,702 (207,357) 368,300 (3,906) 7,478 20,776 (28,639) (184,376)

4,731,398 (4,327,840) (261,432) 142,126

3,049,311 (3,016,625) 5,386 (138,479) (100,407)

107,997 111,000 (91,408) (88,435) (3,144) (550,000) (513,990)

81,831 5,000 (92,913) (86,371) 350,000 (125,300) 132,247

See notes to financial statements -6-

MAP INTERNATIONAL
Statements of Cash Flows (continued)

Years Ended September 30, 2005 2004 Net Change in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year SUPPLEMENTAL DISCLOSURES: Cash paid for interest NONCASH INVESTING ACTIVITIES: Donated securities and other assets Donated property and equipment Property and equipment acquired via capital lease $ 2,142,303 1,028,728 3,171,031 $ (152,536) 1,181,264 1,028,728

$

71,669

$

74,919

$ $ $

307,131 25,000 28,330

$ $ $

191,715 14,976 -

See notes to financial statements -7-

MAP INTERNATIONAL
Statement of Functional Expenses Year Ended September 30, 2005

Essential Medicines EXPENSES: Distributed inventory $ 273,610,044 Cost of goods distributed 851,786 Freight 315,252 Personnel: Salaries and wages 710,022 Employee benefits 197,532 Outside services 117,306 Travel 88,087 Supplies 28,830 Conferences and meetings 17,090 Grants Printing and publications 21,111 Postage 1,910 Equipment rental and repair 42,403 Uncollectible accounts Telephone 12,877 Occupancy 28,658 Interest 16,366 Insurance 40,880 Depreciation 79,889 Miscellaneous 10,518 Total Expenses $ 276,190,561

Program Services Disease, Community Prevention, and Health Eradication Services $ 1,180,233 3,674 1,360 3,063 852 506 380 124 74 91 8 183 56 124 71 176 345 45 $ 1,191,365 $ 35,699,402 111,137 46,565 931,011 215,390 99,550 131,196 54,201 605,093 391,629 17,580 2,071 58,679 36,926 40,370 21,879 10,987 73,748 25,112 $ 38,572,526

Supporting Services Total Program Services $ 310,489,679 966,597 363,177 1,644,096 413,774 217,362 219,663 83,155 622,257 391,629 38,782 3,989 101,265 49,859 69,152 38,316 52,043 153,982 35,675 $ 315,954,452 $ General and Administrative $ 300,993 65,734 79,121 35,324 12,919 12,233 2,927 4,505 62,662 491,481 21,380 17,451 14,817 7,483 25,312 6,019 1,160,361 $ $ FundRaising 879,432 255,204 39,344 94,531 17,131 36,845 901,308 22,099 40,735 24,966 10,049 18,536 5,607 34,535 16,860 2,397,182 $ $ Total Supporting Services 1,180,425 320,938 118,465 129,855 30,050 49,078 904,235 26,604 103,397 491,481 46,346 27,500 33,353 13,090 59,847 22,879 3,557,543 Total $ 310,489,679 966,597 363,177 2,824,521 734,712 335,827 349,518 113,205 671,335 391,629 943,017 30,593 204,662 491,481 96,205 96,652 71,669 65,133 213,829 58,554 $ 319,511,995

See notes to financial statements -8-

MAP INTERNATIONAL
Statement of Functional Expenses Year Ended September 30, 2004

Essential Medicines EXPENSES: Distributed inventory Cost of goods distributed Freight Personnel: Salaries and wages Employee benefits Outside services Travel Supplies Conferences and meetings Printing and publications Postage Equipment rental and repair Uncollectible accounts Telephone Occupancy Interest Insurance Depreciation Miscellaneous Total Expenses

Program Services Disease, Community Prevention, and Health Eradication Services

Supporting Services Total Program Services General and Administrative FundRaising Total Supporting Services

Total

$ 194,467,243 613,412 219,869 696,672 196,173 45,098 73,906 40,711 14,001 6,583 2,935 50,169 12,251 24,022 17,084 40,433 74,993 7,333 $ 196,602,888

$

987,831 27,632 9,904 31,383 8,837 2,032 3,329 1,834 631 297 132 2,260 552 1,082 770 1,821 3,378 330

$ 37,261,976 117,536 34,561 955,882 239,972 90,950 98,134 59,771 408,463 19,777 5,346 92,507 44,845 38,191 25,449 14,184 86,991 26,057 $ 39,620,592

$ 232,717,050 758,580 264,334 1,683,937 444,982 138,080 175,369 102,316 423,095 26,657 8,413 144,936 57,648 63,295 43,303 56,438 165,362 33,720 $ 237,307,515

$

302,512 80,601 60,951 44,735 7,441 12,430 178 7,639 60,885 9,140 21,687 10,772 17,681 9,181 32,049 3,130

$

694,063 223,140 29,173 96,356 14,515 24,809 472,699 13,038 38,173 17,460 10,605 13,935 5,894 30,832 9,667

$

996,575 303,741 90,124 141,091 21,956 37,239 472,877 20,677 99,058 9,140 39,147 21,377 31,616 15,075 62,881 12,797

$ 232,717,050 758,580 264,334 2,680,512 748,723 228,204 316,460 124,272 460,334 499,534 29,090 243,994 9,140 96,795 84,672 74,919 71,513 228,243 46,517 $ 239,682,886

$

1,084,035

$

681,012

$

1,694,359

$

2,375,371

See notes to financial statements -9-

MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

1. NATURE OF ORGANIZATION: MAP International (MAP), founded as Medical Assistance Programs, was incorporated in 1965 in Illinois as a nonprofit corporation. MAP’s purpose is to promote the total health of people living in the world’s impoverished communities. Through its offices in the Unites States, Bolivia, Ecuador, Cote D’Ivoire, and Kenya, MAP promotes access to health services and essential medicines in more than 130 countries. MAP’s operations depend upon gifts-inkind, which include donated medicines, equipment, and supplies primarily from pharmaceutical companies, as well as cash contributions received from individuals, churches, organizations, foundations, and corporations. MAP works with partners to accomplish its objectives through the promotion of community health development and provision of essential medicines, prevention, and eradication of disease. These primary activities are described below:

Essential Medicines– MAP provides critical life-saving medications that are always in short supply in impoverished countries with limited health care. FDA-approved medicines and medical supplies are provided to hospitals, clinics, refugee centers, and physicians in other countries as they are needed. In addition, MAP’s specially designed travel packs are used by Christian health personnel and mission groups on short-term missions and include an assortment of some of the most critically needed medicines and supplies. MAP also provides medicines and supplies for rapid response to humanitarian emergencies around the world and, at times, in the United States. Disease Prevention and Eradication– MAP’s programs provide vital medicines, educational materials, and training to aid in the treatment and prevention of diseases. MAP provides a variety of disease prevention and eradication programs, including the award winning indigenous church-based HIV/AIDS education and prevention programs that benefit communities in Latin America and Africa. MAP’s program in Bolivia vaccinates children and screens them for parasites, malnutrition, and many other diseases. Community Health Services– Total health training workshops teach medical, cultural, and biblical principles of health in remote rural areas from the Amazon to Kenya. The MAP/Reader’s Digest International Fellowship provides opportunities for medical students to serve short-term missions in Christian hospitals around the world. Promotion of a Christian Transformation Network in eight Latin American countries exchanges information and provides training and encouragement for sustainable biblically-based community development.

MAP is classified as a publicly supported organization, which is not a private foundation under Section 509(a)(1) of the Internal Revenue Code (Code) and is exempt from federal income taxes under Section 501(a) as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. Contributions to MAP are taxdeductible within the limitations prescribed by the Code. MAP is also exempt from state franchise and income taxes under Sections 105-130.11(3) of the General Statutes of Georgia. MAP also controls a separate Illinois nonprofit corporation, Upward, Inc. (Upward). Upward is classified as a publicly supported organization, is not a private foundation under Section 509(a)(3) of the Code, and is exempt from federal income taxes under Section 501(a) as an organization described in Section 501(c)(3) of the Code. Upward is organized exclusively for the benefit of and to support the charitable purposes of MAP. Upward had no operating activities during the years ended September 30, 2005 and 2004.
-10-

MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The financial statements of MAP have been prepared on the accrual basis of accounting. The significant accounting policies followed are described herein to enhance the usefulness of the statements to the reader. RECLASSIFICATIONS Certain information from the prior year financial statements has been reclassified to conform to the current year presentation format. ESTIMATES The preparation of the financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash includes petty cash; checking, savings, and money market accounts; and certificates of deposit with original maturity dates of less than three months held in both U.S. and foreign accounts. For U.S. accounts, these accounts may, at times, exceed federally insured limits. MAP has not experienced any losses on such accounts, and management believes it is not exposed to any significant credit risk associated with U.S. based cash and cash equivalents. Foreign cash accounts are under the control of MAP, but it should be noted that the political situation in many countries is subject to rapid change. Therefore, the reader should be aware that while management believes the assets are properly stated at the date of this report, subsequent changes could occur that would adversely affect the value of the assets in other countries. Total cash and cash equivalents held in foreign accounts amounted to $354,855 and $266,339 at September 30, 2005, and 2004, respectively. ACCOUNTS RECEIVABLE Accounts receivable includes billings for service fees and handling charges and are reported net of any anticipated losses due to uncollectible accounts. Foreign field receivables consist primarily of amounts due to MAP under a cost-reimbursement private grant. The organization’s policy for determining when receivables are past due or delinquent is 30 days after invoicing. Uncollectible accounts are reported as additions to the allowance for bad debts when it is determined the amounts are uncollectible. Payments received from nonaccrual receivables are credited to appropriate receivable accounts. The allowance for doubtful accounts is maintained at a level which, in management’s judgment, is adequate to absorb potential losses inherent in the receivable portfolio. The amount of the allowance is based on management’s evaluation of collectibility of the receivable portfolio, including the nature of the portfolio, trends in historical loss experience, specific impaired accounts, and economic conditions. An allowance for uncollectible accounts has been provided for in the amount of $11,945 and $21,600 as of September 30, 2005, and 2004, respectively.

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MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: PLEDGES RECEIVABLE Pledges receivable include unconditional promises made by donors wherein the donor has unconditionally promised to contribute funds to MAP in future periods. Unconditional promises expected to be collected within one year are recorded as support and a receivable at net realizable value. Unconditional promises expected to be collected in future years are recorded as support and a receivable at the present value of expected future cash flows. Discounts on those amounts are computed using risk-free, interest rates applicable to the years in which the promises are received, ranging from 3.60% to 4.75%. Amortization of discounts is included in contribution revenue. Conditional promises are not included as support until the conditions are substantially met. INVENTORY Inventory consists of purchased and donated medical products and supplies. Purchased inventory is stated at the lower of cost or market. Cost is determined using the average cost method. Donated inventory is stated at wholesale value determined on the date of receipt. Inventory cost is expensed when goods are shipped. Management periodically evaluates the net realizable value of all inventory to ensure that any impairments are recognized in the period in which they are incurred. Total inventory held in foreign locations amounts to $33,208 and $30,315 at September 30, 2005, and 2004, respectively. INVESTMENTS Investments in equity and debt securities with readily determinable fair values are reported at fair value. Gains and losses (including unrealized) are reported in the statements of activities as other revenue. Donated investments are recorded at market value on the date of donation and thereafter carried in accordance with the above provisions. ENDOWMENT FUNDS Endowment funds represent assets and net assets that are subject to permanent restriction by gift instruments as prescribed by donors. The principal amount, based on historical gift value of each endowment, is to be maintained permanently. The income derived from each permanent endowment is allocated to the unrestricted or temporarily restricted revenue per the donor’s specifications. During 1997, MAP elected to initiate an interfund borrowing from an endowment fund to an unrestricted fund in the amount of $1.55 million. The purpose of this interfund borrowing was to reduce interest expense associated with external debt. As of September 30, 2005, and 2004, the endowment interfund borrowing balances were $600,000 and $700,000, respectively. PROPERTY AND EQUIPMENT Items purchased as property, plant, and equipment are recorded at historical cost. Donated items are recorded at fair market value on the date of the gift. Depreciation of buildings, equipment, furniture, and fixtures is computed using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 20 years. MAP capitalizes all items greater than $500 for U.S. and locations except for infrequent instances where field representatives capitalize long-lived items with a lower value.

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MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: ANNUITIES PAYABLE MAP has issued charitable gift annuity agreements. Under these agreements, a donor contributes assets to MAP in exchange for the right to receive a fixed dollar annual return during the donor’s lifetime. A portion of the transfer is considered to be a charitable contribution for income tax purposes. The difference between the amount provided for the gift annuity and the liability for future payments, determined on an actuarial basis, is recognized as a contribution at the date of the gift. The annuity liability is revalued annually using a discount rate established at the inception of the agreement and appropriate actuarial assumptions. Actuarial changes and annuity payments are reported as change in value of annuities within other revenue in the statements of activities. REVOCABLE TRUST As trustee, MAP administers a revocable (grantor) trust that provides for a beneficial interest to MAP at the grantor’s death. The principal amounts provided are recorded as liabilities because the trusts are revocable at the discretion of the grantor. Trust income, deductions, and credits are reportable by the grantor for tax purposes. At the grantor’s death, the remaining trust assets will be recorded as contribution support. NET ASSETS The financial statements report amounts by classification of net assets: Unrestricted net assets are those currently available for purposes under the direction of the board, those designated by the board, those resources invested in property and equipment, and those held as annuity reserves. Temporarily restricted net assets are those contributed with donor stipulations for specific operating purposes or programs, those with time restrictions, or those not currently available for use until commitments regarding their use have been fulfilled. Permanently restricted net assets are those contributed with donor restrictions that the principal remain in perpetuity with only the income available as unrestricted or temporarily restricted, per endowment agreements. SUPPORT, REVENUE, AND RECLASSIFICATIONS Revenue is recognized when earned and support when contributions are made, which may be when cash is received, unconditional promises are made, or ownership of donated assets is transferred to MAP. Gifts-in-kind (including inventory, securities, property, and equipment) are recorded at fair value at the date of the gift. Contributions other than gifts-in-kind are primarily cash contributions that are derived from ongoing fund-raising. All contributions are considered to be available for unrestricted use unless specifically designated by the donor. Bequests are recorded as income at the time MAP has an established right to the bequest and the proceeds are measurable.

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MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: SUPPORT, REVENUE, AND RECLASSIFICATIONS, continued Donated inventory (consisting of medicines and medical supplies) is recorded as inventory and contribution revenue at its estimated wholesale value at the date of donation, taking into consideration inventory condition and utility for use. All donated inventory is received from private organizations and is considered to be unrestricted support unless the inventory explicitly contains donor restrictions. MAP only records the value of donated inventory in which they were either the original recipient of the gift, were involved in partnership with another organization for distribution internationally, or used in MAP’s programs. When MAP receives donated inventories with specific geographic or purpose restrictions, they are recognized as temporarily restricted contributions. Donor restrictions are satisfied, and donated inventory is released from restriction and reclassified as unrestricted, when the donated product has been shipped. Donated inventories received with conditions, such as the provision that they cannot be distributed within the United States, are considered limitations rather than purpose restrictions and are therefore reported as unrestricted contributions.

Donated property and equipment are recorded as temporarily restricted if donors stipulate how or how long the asset must be used. In the absence of such stipulations, contributions of property and equipment are recorded as unrestricted support. The accompanying financial statements do not recognize the value of donated services as such services do not meet the recognition requirements under Statement of Financial Accounting Standards 116; however, a substantial number of volunteers have donated significant amounts of their time to MAP’s program services. During the years ended September 30, 2005, and 2004, management estimated that volunteers donated over 3,107 and 5,042 hours each year to MAP, respectively. Service fee revenues, including handling charges, are received primarily from organizations and mission boards to offset administrative costs for distribution of donated inventory and covers only a portion of total operating costs. Service fee revenue is recognized when the inventory is shipped to a recipient. MAP reports contributions as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when the stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. EXPENSES Expenses are recorded when incurred in accordance with the accrual basis of accounting. The costs of providing various program services and supporting activities of the organization have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the program services and supporting activities benefited.

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MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: ALLOCATION OF JOINT COSTS MAP has adopted the American Institute of Certified Public Accountants’ Statement of Position 98-2, Accounting for Costs of Activities of Not-for-Profit Organizations and State and Local Government Entities that Include Fund-Raising. This statement requires all costs which contain a fund-raising appeal to be allocated to fund-raising unless all of the following three tests are met: content, purpose, and audience. MAP incurs costs for activities, such as publications of newsletters and appeal letters that include fund-raising components. These costs are referred to as joint costs and are allocated to program activities and fund-raising. Joint cost allocations are as follows: Years Ended September 30, 2005 2004 Program activities Fund-raising $ 17,942 879,200 897,142 $ 9,397 460,434 469,831

$ 3. ACCOUNTS RECEIVABLE–NET: Accounts receivable consist of:

$

September 30, 2005 2004 Trade receivables Foreign field receivables Less allowance for uncollectible accounts $ 4. PLEDGES RECEIVABLE–NET: Pledges receivable–net consist of: September 30, 2005 2004 Unconditional promises receivable (pledges) before unamortized discount Less unamortized discount $ 1,123,606 (125,042) 998,564 $ 1,864,278 (435,495) 1,428,783 $ 161,052 25,925 186,977 (11,945) 175,032 $ 202,013 231,678 433,691 (21,600) 412,091

$

$
-15-

$

MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

4. PLEDGES RECEIVABLE–NET, continued: Pledges are due to be collected as follows: Less than one year One to five years

$

429,136 569,428 998,564

$ 5. INVESTMENTS: Investments consist of:

September 30, 2005 2004 Money market funds and certificates of deposit Marketable equity securities Government and corporate bonds Closely held stock * Other investments $ 666,207 1,753,263 1,923,619 103,094 4,446,183 $ 697,643 1,813,524 1,777,188 515,000 44,390 4,847,745

$ Investments are held for the following purposes:

$

September 30, 2005 2004 Operating Specified time or purpose: Annuity funds Designated for medicine purchases Funds held for loan repayment Revocable trusts $ 12,107 487,785 426,027 29,712 20,000 963,524 3,470,552 $ 4,446,183 $ $ 530,368 420,432 413,845 26,785 20,000 881,062 3,436,315 4,847,745

Endowment

* During the year ended September 30, 2005, MAP learned about financial difficulties in a company which MAP owns 64,375 shares previously valued at $515,000. Based upon management’s assessment of expected realization, MAP felt it necessary to write-down the value of the closely held stock to $0. The write-down was recorded as a component of investment income (see below).
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MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

5. INVESTMENTS, continued: Investment income consists of the following: Years Ended September 30, 2005 2004 Unrestricted: Interest and dividends Write-off of closely held stock Net realized gains (losses) Net unrealized gains (losses)

$

104,567 (515,000) 41,020 32,494 (336,919)

$

79,056 22,061 (7,457) 93,660

$ Temporarily restricted: Interest and dividends Net realized gains (losses) Net unrealized gains

$

$

30,766 58,960 18,271 107,997

$

26,963 12,423 42,445 81,831

$ 6. PROPERTY AND EQUIPMENT–NET: Property and equipment–net consist of:

$

U.S. Land and improvements Building and improvements Equipment Less accumulated depreciation $ $

September 30, 2005 Foreign $ 82,500 247,306 669,581 999,387 (516,593) 482,794 $

Total 246,278 2,126,324 2,329,813 4,702,415 (2,908,957) 1,793,458

163,778 1,879,018 1,660,232 3,703,028 (2,392,364) 1,310,664

$

$

U.S. Land and improvements Building and improvements Equipment Less accumulated depreciation
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September 30, 2004 Foreign $ 94,111 217,486 562,543 874,140 (442,605) 431,535 $

Total 257,889 2,018,484 2,133,764 4,410,137 (2,703,624) 1,706,513

$

163,778 1,800,998 1,571,221 3,535,997 (2,261,019) 1,274,978

$

$

$

MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

6. PROPERTY AND EQUIPMENT–NET, continued: Net equity in property and equipment consists of: September 30, 2005 2004 Property and equipment–net Less related debt (includes capital lease obligation) $ 1,793,458 (726,172) 1,067,286 $ 1,706,513 (789,421) 917,092

$

$

Management has reviewed the assets in other countries and, in its opinion, has determined they are under the control of MAP. While for this reason such items are recognized as assets of MAP, it should be noted that the political situation in many countries is subject to rapid change. Therefore, the reader should be aware that while management believes the assets are properly stated at the date of this report, subsequent changes could occur that would adversely affect the value of the assets in other countries. In addition, it should be understood that the assets in other countries may not be representative of the amount that would be realized should the assets be sold. Many of the assets were designed to carry out the specific programs of MAP, and they might have limited resale potential. 7. NOTES AND LOANS PAYABLE: Notes and loans payable consist of: September 30, 2005 2004 Note payable, secured by real property, payable in monthly installments of $10,159 with any remaining unpaid balance due May 2012. Interest is charged at .50% over the prime rate and adjusted annually on the anniversary date of the loan, May 1st (effective rate on September 30, 2005 was 5.75%). Unsecured line of credit in the amount of $300,125 with interest at the prime rate (effective rate at September 30, 2004 was 4.75%). The line of credit matured March 2005. Unsecured line of credit in the amount of $300,000 with interest at the prime rate (effective rate at September 30, 2004 was 4.75%). The line of credit matured January 2005. Capital lease on equipment with total monthly payments of $467 ending December 2009 Noninterest bearing demand loan payable to a donor $
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$

700,986

$

789,421

-

300,000

-

250,000

25,186 20,000 746,172 $

20,000 1,359,421

MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

7. NOTES AND LOANS PAYABLE, continued: Maturities of notes and loans payable are as follows: Years Ending September 30, 2006 2007 2008 2009 Thereafter $ Amount 117,099 103,225 109,772 116,777 299,299 746,172

$

8. ANNUITIES AND TRUST PAYABLE: Annuities payable represent the present value of future payments to annuitants. Annuity liabilities are computed using federal income tax mortality rate tables and charitable mid-term rates published by the Internal Revenue Service at the inception of the agreement. Annuities payable consist of: September 30, 2005 2004 Annuities payable–current portion Annuities payable–net of current portion Revocable trusts $ $ 92,732 339,598 432,330 20,000 452,330 $ 95,530 297,110 392,640 20,000 412,640

$

Years Ended September 30, 2005 2004 Change in value of annuities: Interest and dividends Net realized gains Net unrealized gains Annuity payments Fees Terminated annuities Actuarial change

$

11,165 24,109 1,510 (91,408) (1,942) 10,425 (20,098) (66,239)

$

5,031 7,016 14,127 (92,913) (1,502) 18,842 (54,702) (104,101)

$

$

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MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

9. NET ASSETS: Net assets consist of: September 30, 2005 2004 Unrestricted net assets: Operating Donated inventory Designated for annual medicine purchases Designated for bulk purchases of medicines Designated for annuity reserve Designated for loan repayment Net equity in property and equipment Obligation for repayment of endowment funds

$

64,517 61,090,819 400,000 100,000 432,331 20,000 1,067,286 (331,155) 62,843,798

$

(92,334) 43,968,967 400,000 100,000 392,640 20,000 917,092 (331,155) 45,375,210

Temporarily restricted net assets: Donated inventory Pledges receivable Pledges receivable for scholarship funds Special projects Relief

18,707,849 988,375 10,189 283,414 2,173,869 22,163,696

7,348,025 1,386,495 42,288 535,590 340,654 9,653,052

Permanently restricted: MAP program activities endowment Reader’s Digest International Fellowship endowment

2,561,443 1,206,027 3,767,470 $ 88,774,964 $

2,561,443 1,206,027 3,767,470 58,795,732

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MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

10. GIFTS-IN-KIND: MAP receives donations of medicine and supplies for use in relief and development programs. MAP ships all such gifts-in-kind to similar not-for-profit organizations for ultimate distribution throughout the world. For the years ended September 30, 2005, and 2004, MAP distributed donated inventory totaling $310,489,679 and $232,717,050, respectively. For the year ended September 30, 2005, $310,482,254 of donated inventory was delivered to MAP before being distributed, and the remaining amount of $7,425 was shipped directly from the donor to the organizations. For the year ended September 30, 2004, $232,672,558 of donated inventory was delivered to MAP before being distributed, and the remaining amount of $44,492 was shipped directly from the donor to the organizations. In accordance with Interagency Standards established by the Association of Evangelical Relief and Development Organizations (AERDO), MAP only records the value of gifts-in-kind for which they were either the original recipient of the gift or were involved in partnership with another organization for international distribution.

11. EMPLOYEE BENEFIT PLANS: MAP offers its full-time, permanent employees health, life, and disability insurance plans. MAP also has a defined contribution retirement plan (Plan) covering substantially all of its employees. The Plan consists of three components: (1) MAP’s variable contribution, (2) employee deferred contributions to the Plan, and (3) employer matching components. Employees are eligible to participate in the Plan immediately upon employment. Eligibility for the variable contribution and matching programs begins after one year of service with full vesting of employer contributions occurring after 5 years of service. MAP’s variable contribution may vary, but for the years ended September 30, 2005, and 2004, eligible employees received a contribution equal to 4% of annual salary. During the past two fiscal years, MAP matched eligible 401(k) contributions at a rate of 50% of the first 6% of annual salary deferred. Fiduciaries of the Plan include MAP officers as Trustees and Administrator and Manufacturers Life Insurance Company as Investment Manager or Custodian. Amounts contributed by MAP to this plan during the fiscal years ended September 30, 2005, and 2004 were $115,412 and $108,439, respectively.

12. COMMITMENTS: MAP maintains certain noncancellable operating leases for certain buildings expiring at various dates through 2008. The scheduled obligations associated with these noncancellable operating leases are as follows: Years Ending September 30, 2006 2007 2008 $ Amount 92,258 52,322 4,440 149,020

$

Rental expense under operating leases totaled approximately $65,697 and $59,865 for the years ended September 30, 2005, and 2004, respectively and is allocated to the program services and supporting activities benefited.

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MAP INTERNATIONAL
Notes to Financial Statements September 30, 2005 and 2004

13. DONOR CONCENTRATION: Approximately 46% and 19% of the donated inventory received by MAP for the years ended September 30, 2005, and 2004, respectively, was provided by five donors. The organizational implications of this concentration are recognized by management and the board.

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